EconomicsCBSE Class 12 · Liberalisation, Privatisation and Globalisation: An Appraisal

Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms (Class 12)

Updated 17 October 2026 · Fact-checked

Globalisation is the integration of an economy with the world economy. Outsourcing means buying services earlier done in-house from outside sources, often abroad. The WTO (1995), successor to GATT (1948), sets rules for world trade. Reforms raised growth, reserves and foreign investment but did not generate enough jobs and slowed agricultural growth.

Notice that GATT (1948, 23 countries) became the WTO in 1995, and that work is outsourced to India for its low wages and skilled people.

Illustration drawn for QuestionBuddy.

Understand Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms

Globalisation. The integration of a country's economy with the world economy through networks and activities that cross economic, social and geographical boundaries, so that events far away affect India. It aims at a 'borderless world'. It rests on the trade and investment reforms of 1991: removal of quantitative restrictions, lower tariffs and no import licensing, with quantitative restrictions on manufactured consumer goods and agricultural products fully removed from April 2001.

Outsourcing. A company hires regular services from outside sources, mostly from other countries, that were earlier provided internally: legal advice, computer services, advertising, security. Fast communication and information technology intensified it. BPOs and call centres, record keeping, accountancy, banking services, music recording, film editing, book transcription, clinical advice and teaching are outsourced to India because of low wages and skilled manpower.

The World Trade Organisation. Founded in 1995 as the successor to the GATT (set up in 1948 with 23 countries). It administers multilateral trade agreements, aims at a rule-based trading regime without arbitrary restrictions, expands production and trade in services, makes optimum use of world resources and protects the environment. India has removed quantitative restrictions and lowered tariffs as committed. Critics say that most trade is among developed countries, and that developing countries must open their markets while developed ones keep farm subsidies.

Appraisal of the reforms (NCERT).

*Positive*: GDP growth rose from 5.6% (1980-91) to as high as 8.2% (2007-12) and 9.4% in 2021-22, driven mainly by services; foreign investment (FDI and FII) rose from about USD 100 million in 1990-91 to USD 23 billion in 2022-23; foreign exchange reserves rose from about USD 6 billion in 1990-91 to about USD 646 billion in 2023-24; India became a successful exporter of auto parts, pharmaceuticals, engineering goods, software and textiles; prices were kept under control.
*Concerns*: reform-led growth did not generate enough employment; agriculture growth decelerated as public investment in irrigation, power, roads and research fell and partial removal of fertiliser subsidy raised costs; industry faced cheaper imports, weak infrastructure and trade barriers in developed countries; disinvestment undervalued assets; fiscal policy lost revenue to tariff cuts and tax incentives to foreign investors.

Sector	1980-91	1992-2001	2002-07	2007-12	2021-22
Agriculture	3.6	3.3	2.3	3.2	4.8 (GVA)
Industry	7.1	6.5	9.4	7.4	12.7 (GVA)
Services	6.7	8.2	7.8	10.0	9.2 (GVA)
Total GDP	5.6	6.4	7.8	8.2	9.4

Neighbouring topics. The 1991 liberalisation measures and privatisation are on separate pages.

Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms: key facts

Multiple of increase: Multiple = later value / earlier value; For reserves and investment.
Cost saving from outsourcing: Saving = (in-house cost - outsourced cost) x units x periods; Costs in the sums are assumed.
Price after tariff: Domestic price = import price x (1 + tariff rate); Tariff as a decimal.
Key dates: GATT 1948
NEP 1991
WTO 1995
QRs removed April 2001; NCERT dates.

How to answer Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms questions

Questions ask for definitions of globalisation and outsourcing, the WTO, reasons India attracts outsourcing, and a balanced appraisal; sums use growth data or cost savings.

1Define the term and give one example.
2For outsourcing, give the cause (IT and communication) and India's advantages (low wages, skilled manpower).
3For the WTO, give the year, predecessor and aims, and one criticism from developing countries.
4For appraisal, write at least two achievements with NCERT figures and two concerns.
5For sums, identify the right row and compute multiples or savings with units.

Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Outsourcing

Suppose a foreign bank pays ₹80,000 a month per employee for a customer-help team of 40 in its own country, but an Indian firm can provide the same service at ₹30,000 per employee per month.

What is the annual saving, and why is India attractive?

Try it first, then show the solutionSolution

Saving per employee-month = 80,000 - 30,000 = ₹50,000.
For 40 staff for a month = ₹20,00,000; for 12 months = ₹2,40,00,000 (₹2.4 crore).
India offers low wages and skilled manpower.

Answer: Annual saving of ₹2.4 crore for the bank; India gains jobs and foreign exchange.

Memory hook: Same work, lower cost, faster by internet.

Tariff cuts

Imagine an imported toy priced at ₹1,000 before tariff. With a 40% tariff, it sells at ₹1,400; after reforms the tariff is cut to 10%.

What happens to the price and what does it mean for domestic toy makers?

Try it first, then show the solutionSolution

New price = 1,000 x 1.10 = ₹1,100.
Fall = 1,400 - 1,100 = ₹300, or 300 / 1,400 x 100 = 21.4%.
Domestic makers face tougher competition.

Answer: The toy becomes 21.4% cheaper, benefiting consumers but squeezing domestic producers, a concern NCERT raises for industry.

Memory hook: Lower tariff, cheaper import, tougher rival.

Tricks to remember Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms

Short memory aids. Say each one aloud once, then use it on a question the same day.

48-95
GATT 1948, WTO 1995.
Use it when: Dates.
Why India for outsourcing
Low wages and skilled manpower.
Use it when: Outsourcing question.
JAIDE
Jobs, Agriculture, Industry, Disinvestment, Exchequer (fiscal): the five concerns about reforms.
Use it when: Appraisal.

Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: WTO · 1 mark · MCQBoard level

The World Trade Organisation was established in:
(a) 1948
(b) 1991
(c) 1995
(d) 2001

Try it first, then show the solutionSolution

WTO was founded in 1995 as GATT's successor.

Example 2: Outsourcing · 3 marks · Short answerBoard level

What is outsourcing? Why has India become a favoured destination for it? (3 marks)

Try it first, then show the solutionSolution

Define with examples.
Reasons: low wages and skilled manpower; IT and communication.

Answer: Outsourcing is hiring regular services from outside sources, mostly from other countries, that a firm earlier provided internally, such as legal advice, computer services and advertising. Fast communication and information technology intensified it. India is favoured because wages are low and skilled manpower is available, so BPOs, call centres, accountancy and other services are located here.

Example 3: Reading the reform data · 4 marks · Short answerHarder board level

Using NCERT data: (i) by how many times did foreign exchange reserves rise from about USD 6 billion (1990-91) to about USD 646 billion (2023-24)? (ii) By how many times did foreign investment rise from about USD 100 million (1990-91) to USD 23 billion (2022-23)? (iii) By how many percentage points did GDP growth rise from 1980-91 (5.6%) to 2007-12 (8.2%)? (4 marks)

Try it first, then show the solutionSolution

(i) 646 / 6 = 107.7 times.
(ii) 23 billion = 23,000 million; 23,000 / 100 = 230 times.
(iii) 8.2 - 5.6 = 2.6 percentage points.

Answer: (i) About 107.7 times. (ii) 230 times. (iii) 2.6 percentage points.

Example 4: Cost-benefit of outsourcing · 5 marks · Short answerHarder board level

Suppose a firm abroad outsources 50 back-office jobs to India. In-house cost is ₹90,000 per job per month, the outsourced cost is ₹35,000 per job per month, and the firm pays a one-time set-up cost of ₹1.1 crore. Find (i) the monthly saving, (ii) the annual saving, (iii) the number of months to recover the set-up cost. Name one disadvantage for workers in the firm's own country. (5 marks)

Try it first, then show the solutionSolution

(i) Monthly saving = (90,000 - 35,000) x 50 = 55,000 x 50 = ₹27,50,000.
(ii) Annual saving = 27,50,000 x 12 = ₹3,30,00,000 (₹3.3 crore).
(iii) Set-up cost ₹1.1 crore = ₹1,10,00,000; months = 1,10,00,000 / 27,50,000 = 4 months.
Disadvantage: jobs at home are lost or wages are pressured.

Answer: (i) ₹27.5 lakh a month. (ii) ₹3.3 crore a year. (iii) 4 months. Workers at home may lose jobs.

Example 5: Evaluate the reforms · 6 marks · Long answerHOTS / competency

Suppose a student says: 'The reforms were a complete success because the economy grew faster.' Using NCERT's appraisal, evaluate this statement with at least two achievements and three concerns, and attribute the criticisms to the sectors affected. (6 marks)

Try it first, then show the solutionSolution

Achievements: GDP growth rose from 5.6% to 8.2% (2007-12) and 9.4% in 2021-22; reserves rose to about USD 646 billion; foreign investment rose.
Employment: growth did not generate enough jobs.
Agriculture: growth slowed as public investment fell and fertiliser subsidy was partly removed; export-crop shift affected food security.
Industry: cheaper imports and weak infrastructure hurt domestic producers.
Conclusion: successes in growth and external balance, but with uneven benefits; so 'complete success' is overstated.

Answer: Growth, reserves and investment improved, but jobs, agriculture and domestic industry showed problems; the statement is only partly true.

Where students lose marks in Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms

The slips examiners see most often, and what to write instead.

Mistake: Confusing GATT and WTO dates
Both are trade bodies.
Wrong working
WTO was founded in 1948.
Right working
GATT was set up in 1948; the WTO was founded in 1995.
Do this: 48-95.
Usually costs: 1 mark.
Mistake: Writing only benefits in an appraisal
One-sided answers.
Wrong working
Reforms raised growth, reserves and exports.
Right working
Also mention jobless growth, slow agricultural growth, tougher industry competition and loss of revenue from tariff cuts.
Do this: Write 2 + 2 minimum.
Usually costs: 1 to 2 marks.
Mistake: Mixing millions and billions
Units differ in the data.
Wrong working
23 / 100 = 0.23 times.
Right working
23 billion = 23,000 million; 23,000 / 100 = 230 times.
Do this: Convert to one unit.
Usually costs: 1 mark.

Exam tips

Give NCERT numbers in the appraisal: 5.6% to 8.2%, USD 6 billion to USD 646 billion, USD 100 million to USD 23 billion.
For outsourcing, mention that it is based on information technology and low-wage skilled labour.
Attribute criticisms to the sectors affected and keep a balanced tone.

Practice questions on Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Which of the following is an example of outsourcing?
(a) A firm producing its own components
(b) A foreign company running its customer support from India
(c) A government subsidy to farmers
(d) Collecting income tax
Hint
Services from outside, often abroad.
Answer
(b) A foreign company running its customer support from India
Q2 · 3 marks · Short answerBoard level
State the aims of the WTO and one criticism made by developing countries. (3 marks)
Hint
Rule-based regime; farm subsidies.
Answer
Aims: a rule-based trading regime without arbitrary restrictions, expanded production and trade in goods and services, optimum use of world resources, and environmental protection. Criticism: developing countries must open their markets while developed countries retain farm subsidies, and most trade is among developed nations.
Q3 · 3 marks · Short answerHarder board level
An imported machine costs ₹5,00,000 before tariff. Tariff falls from 30% to 12%. Find the domestic price before and after and the percentage fall. (3 marks)
Hint
Price = base x (1 + tariff).
Answer
Before: 5,00,000 x 1.30 = ₹6,50,000. After: 5,00,000 x 1.12 = ₹5,60,000. Fall = 90,000 / 6,50,000 x 100 = about 13.8%.
Q4 · 4 marks · Short answerHarder board level
From the NCERT growth table, find the gap between industry and agriculture growth in 2002-07 and the average annual growth of services over 1992-2001 and 2007-12 combined (simple average of the two periods). What do they show? (4 marks)
Hint
Industry 9.4, agriculture 2.3; services 8.2 and 10.0.
Answer
Gap in 2002-07 = 9.4 - 2.3 = 7.1 points. Average services growth = (8.2 + 10.0) / 2 = 9.1% a year. Industry and services grew much faster than agriculture, which shows the uneven sectoral impact of the reforms.
Q5 · 1 mark · Assertion-reasonHOTS / competency
Assertion (A): Reform-led growth has been criticised for not creating enough employment.
Reason (R): Growth was driven mainly by the services sector, which did not absorb workers in proportion to output.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
NCERT notes growth driven by services.
Answer
(a) Both A and R are true and R is the correct explanation of A.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Define globalisation.Show answer
Integration of a country's economy with the world economy.
2.How many countries founded GATT in 1948?Show answer
23.
3.Why is India attractive for outsourcing?Show answer
Low wages and skilled manpower.
4.By how many times did foreign exchange reserves rise from USD 6 billion to USD 646 billion?Show answer
About 107.7 times.
5.Name two concerns about the reforms.Show answer
Inadequate employment generation and slow growth of agriculture.

Globalisation, Outsourcing, the WTO and an Appraisal of the Reforms: frequently asked questions

What is the difference between GATT and WTO?

GATT (1948) was the earlier trade agreement of 23 countries; the WTO (1995) replaced it with a body that administers multilateral trade agreements.

What is a BPO?

A business process outsourcing firm that provides services such as call centres and record keeping for companies abroad.

Why has agriculture been affected by the reforms?

Public investment in irrigation, power and roads fell, fertiliser subsidy was partly removed, and cheaper imports and export-crop shifts affected farmers, according to NCERT.

Are the outsourcing costs real?

No. Salary and set-up costs in the sums are assumed; the reform data come from NCERT.